3 Top Dividend Stocks To Boost Your Retirement Income 

Who knows what’s in store for investors this year. If 2020 proved anything, it's that forecasting for the coming 12 months is an extremely risky business. 

At the start of 2020, nobody was even close to telling us that the global economy would plunge into the worst recession since the Great Depression, only to be followed by one of the fastest economic and market recoveries in history. 

So smart investors should focus on companies that have durable competitive advantages, businesses that consistently generate strong cash flows. Play the long game. 

And if you’re investing to build an income stream for your retirement, then pursuing this strategy becomes even more important. Hunt for stocks that are reliable, safe and sell basic products and services, like retailers, banks, utilities and insurance.

Buying these stocks may not make you a millionaire overnight, but they won’t stop paying you income during your golden years. Below, I’ve put together a list of three stocks that you should consider buying for your retirement portfolio.

1. Costco Wholesale

Large U.S. retailers have proven to be reliable income producers for retirees. The nature of their business—selling staples consumers need no matter the economic situation—makes them a safe bet in markets prone to all kinds of risks.

Among this group, Costco Wholesale (NASDAQ:COST) is one of our favorites.

Costco’s extensive store network and its subscription-based retail model provide the stability to its revenue that long-term investors desire.

Costco Weekly Chart.

With a substantial part of its business focused on selling merchandise at low profit margins, the warehouse shopping club has about 99 million members. In 2019, they paid the company $3.35 billion in membership fees alone. Overall, the retailer generated more than $160 billion in annual sales.

This financial strength has allowed Costco to reward its shareholders with growing dividends. In November, the company announced a record $4.4-billion special distribution. On a per-share basis, that comes out to about $10 per share. 

After surging about 150% during the past five years, Costco stock doesn’t come cheap. It closed down 1.52% yesterday, at $370.02. However, many analysts believe that after the pandemic, Costco will get stronger, delivering yet more upside for savvy investors. Costco provides a $0.70-a-share quarterly payout, which has grown 12.7% per year during the past five years.  

2. Royal Bank of Canada

Canadian banks that are traded on the New York Stock Exchange offer another great income avenue for retirees in North America. What makes them reliable income generators is Canada’s sound regulatory environment, less competition and their revenue diversification.

Canada’s top lenders have been very consistent in rewarding investors through steadily growing dividends, on which they spend about 40%-50% of their income.

In this group, we particularly like Royal Bank of Canada (NYSE:RY) (TSX:RY), Canada’s biggest lender. The lender currently offers an annual dividend yield of more than 4%, a rate quite attractive when compared with the average yield paid by S&P 500 companies.

Royal Bank Weekly Chart.

With a high dividend yield, RY has been quite consistent in growing its payout, making it a solid dividend growth stock. During the past decade, the bank’s per-share annual payout has grown from $2.00 to $4.29, translating to a compound annual growth rate (CAGR) of 8%. With the dividend payout ratio around 45%, the lender has much more room to grow it going forward.

With the pandemic still raging, cyclical stocks such as banks aren’t going to produce massive gains for investors, but this is also a good time for long-term investors to lock in their higher yields. With a 4% yield, Royal Bank of Canada is certainly a top dividend stock to consider.

3. Broadcom Inc.

If you plan to combine growth with a steadily increasing dividend stream, then you should target matured companies in the technology space. The semiconductor giant Broadcom (NASDAQ:AVGO) stands out in this group due to its attractive, more-than-3%-dividend yield, and its growing payouts.

Broadcom Weekly Chart.

Its dividend has grown massively during the past decade, from just under $0.10 a share in 2011 to $3.6 quarterly payments currently. This impressive growth has been backed by a smart acquisition strategy and exploding demand for connected devices, like smartphones.

Broadcom is a major provider of semiconductors that filter radio signals and provide Wi-Fi connections in smartphones, including the iPhone. It also dominates the market for switches, machines that direct traffic between server computers in data centers. 

With the growing use of cloud computing and introduction of 5G-enabled phones, Broadcom is well-positioned to continue with its growth trajectory and provide increasing income to its long-term investors.